Why the SEC is being asked to revisit proxy rules

The Securities and Exchange Commission (SEC) headquarters building in Washington D.C.

The Securities and Exchange Commission has received a new push to revisit a 2011 proposed rule that would have given shareholders proxy access.

In a 132-page report, the CFA Institute attempted to answer questions that the Washington D.C. Circuit Court of Appeals put forth when it struck down the the SEC’s proposed rule–the biggest question being, the lack of a cost benefit analysis.

Matt Orsagh, director of capital markets policy at CFA Institute, said it was a difficult process, but being able to watch the market react to the proposed rule and then its rejection gave them insight.

“We found that the markets generally react favorably to proxy access,” Orsagh said. “What happened to companies on that day, when the SEC announced the proxy access rule, that told us some things.”

A proxy access rule would allow shareowners to add their board member recommendations, essentially giving shareowners more a voice in decision making.

Along with the likely positive impact on the market, Orsagh said the CFA Institute concludes a proxy access rule would also improve accountability.

“In one sentence,” Orsagh said, “it’s all about board accountability.”

He also mentioned that he doesn’t think the argument of a proxy access rule allowing special interest groups to press their agendas, will be an issue.

Under the previous proposed rule that CFA Institute wants the SEC to revisit, in order to gain proxy access, shareowners have to own at least 3% of a company for three years. Orsagh said those requirements would likely prevent the Carl Icahns of the world from swooping in to push agendas.

Orsagh said they hope to just get the conversation going again and that hopefully the SEC will pick up where it left off in considering a proxy access rule.